Good evening. I‘m Chris Matthews. Leading off tonight: Hillary blames America. Our secretary of state‘s in Mexico and pointing her finger north, saying our country is largely to blame for the Mexican drug violence. She says if it weren‘t for the big market for cocaine and other drugs in the U.S., if it weren‘t for the easy supply of automatic weapons from here, Mexico would not be the site of such slaughter.

She told all this to our colleague, Andrea Mitchell. Here she is.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: We do have responsibility for what‘s happening in Mexico. It is drug demand in the United States which drives the drugs north across our border.

(END VIDEO CLIP)

MATTHEWS: So is the drug business here in the U.S. responsible for what‘s happening in Mexico? And if so, does anyone, including Senator Clinton—now Secretary Clinton—believe the United States‘ drug problem will end any time in the foreseeable future? And why our the secretary of state pointing the blame at something she doesn‘t expect to change? We‘ll debate that in a moment.

Plus: As a candidate, Barack Obama made creative use of the Internet to raise his profile and money. Today he went back on line to take questions directly from voters in a first-ever presidential virtual town meeting just two days after the president took no questions from major newspapers at his news conference. Does this mean Obama is trying to bypass the critics? Can the presidency of perpetual campaigning avoid the national media and sell directly to voters?

And if Republicans make a comeback, they hope to start on Tuesday, this coming Tuesday, in a special election for a House seat up in New York state. The big feet are moving in. The Republican Party way ahead in the race a few weeks ago, but the race has tightened. And now Vice President Joe Biden has made a radio ad for the Democratic candidate. We‘ll talk to the HARDBALL strategists about why this one little congressional race could really matter next year.

And Alaska Governor Sarah Palin is out there again, attacking the McCain campaign, which she apparently won‘t forgive for plucking her out of obscurity.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), FMR VICE PRESIDENTIAL CND: The McCain campaign, love ‘em, you know, there are a lot of people around me, but nobody that I could find that I wanted to hold hands with and pray with.

(END VIDEO CLIP)

MATTHEWS: Well, she also attacked the press again. I‘m sorry if that‘s not news. All in the “Politics Fix” tonight.

And I have the honor to present a HARDBALL Award tonight, and this could be a big one, a preview of coming major political attractions. It‘s about those poor (ph) sign (ph) folk up on Wall Street and the one guy who‘s been out there hunting for them.

But first: The secretary of state blames America for the Mexican drug wars. Pat Buchanan is an MSNBC political analyst and a man who‘s very concerned historically about the border down there. Pat, Hillary Clinton‘s in another country, Mexico. We know about the hell going on down there, these incredible cartel wars, 7,000 people dead in the last year. It‘s almost a revolution down there. She says it‘s our fault, basically. We got a drug market like nobody‘s business. These drugs are coming up through Mexico from Colombia. If we didn‘t have the market, they wouldn‘t have the mayhem.

PAT BUCHANAN, MSNBC POLITICAL ANALYST: Well, there‘s no doubt that they‘re fighting over access to the American market or control of the drugs going into the United States because of the enormous demand and the money, Chris. But I think it is a little bit of appeasement to say that the United States is responsible when they‘re cutting people‘s heads off, killed 6,000 people last year in the drug wars. They got 45,000 troops in there. They‘re beheading. There‘s tremendous corruption in the police force, in the government. There‘s all kinds of problems down there.

Those drug cartels have so much money, they really don‘t depend on the United States for weaponry. They can get weapons anywhere they want. There is a point she‘s making about the drug market in the United States is what everybody‘s fighting over, but we‘re not responsible, I think, for the fact the Gulf (ph) cartel‘s after the Tijuana cartel.

MATTHEWS: Well, here she is in her interview with Andrea Mitchell, our colleague, secretary of state Hillary Clinton. She said we bear responsibility for the drug-related violence in Mexico. Here‘s more of that interview.

CLINTON: We do have responsibility for what‘s happening in Mexico. It is drug demand in the United States which drives the drugs north across our border. If there were not such a high level of demand, it wouldn‘t be so profitable and you would haven‘t these drug gangs fighting for territory because they make so much money selling drugs to Americans. And we have assault weapons and other guns coming south illegally to arm the drug gangs against the Mexican army and police. That‘s why we say it is a shared responsibility.

(END VIDEO CLIP)

MATTHEWS: Well, the problem with that is—I think she‘s doing a great job as secretary of state, really keeping her head down and being dutiful and really doing the job, clearly, from all the evidence. But the problem with that in saying that—and it is a fact—what are we going to do about it? Nobody has a plan for getting rid of the drug market in the United States. This is a relatively free country. You could have tough laws. You can put dealers in jail for 20 years. That doesn‘t work. People have their own decisions they make in life, and they make the bad ones oftentimes, and you got to live with it.

Are we saying—is that what the secretary is saying—as long as there‘s people in this country who want access to cocaine, either crack cocaine or the powder, that we‘re going to have these guys cutting each other‘s heads off down there, and it‘s our fault?

BUCHANAN: Well, that‘s where she is wrong. There‘s no doubt that the market in the United States, I mean, billions and billions of dollars, is what people are fighting over, but we‘re not responsible for the fact that they‘re killing each other fighting over the battle down there, Chris. But you are right. There‘s two ways to solve this, Milton Friedman‘s way and Mao‘s way, which will end it. Now...

BUCHANAN: They‘re former—they‘re candidates for the president of the United States have smoked dope or used dope. So we‘re not going to do that solution and we‘re not going to kill them all. So we got what we got.

MATTHEWS: They‘ve been self-admitted, too, by the way, in the very indirect way that they talk.

Andrea Mitchell, by the way—here‘s more of the interview. Made a lot of news, Senator—Secretary Clinton. Here it is.

(BEGIN VIDEO CLIP)

ANDREA MITCHELL, NBC CORRESPONDENT: One of the things that the Mexicans are concerned about are the assault weapons, and that ban was permitted to expire in previous years. You spent your life as a first lady and as a senator fighting against the drugs, fighting for that ban. Why not take that on? Politically tough, but why doesn‘t the administration challenge the gun lobby and take on the assault weapon ban and reinstitute it?

CLINTON: Well, as Secretary Napolitano said yesterday, we‘re going to use every tool at our disposal, many of which were put on a back shelf during the prior administration. We‘re going to start tracing these guns. We‘re going to start cracking down on illegal gun sales. We‘re going to go after the straw men and women who go in and buy these guns. We‘re going to do much more on trying to prevent them from getting into Mexico in the first place.

(END VIDEO CLIP)

MATTHEWS: Well, that‘s started a fight. Here‘s John Cornyn of Texas, a Republican, going after the senator—the secretary—I keeping calling her the senator. For so many years, she was the senator from New York, of course—the secretary of state. Here they are, the Republicans, jumping back on the Clintons again.

SEN. JOHN CORNYN ®, TEXAS: I don‘t think restricting the 2nd Amendment rights of Americans is a solution to what‘s happening in Mexico. I do support the efforts by the Bureau of Alcohol, Tobacco and Firearms and of the United States government to help the Mexican government by stopping the flow of guns south that cannot legally be imported into Mexico. But of course, most of our attention has been on traffic and weapons and drugs coming north, not going south. The Mexican government has to step up, provide additional resources to help protect their own border.

(END VIDEO CLIP)

MATTHEWS: Well, the 2nd Amendment has got to be the most sensitive amendment next to the 1st Amendment...

BUCHANAN: Right.

MATTHEWS: ... in this country, and there you heard it.

BUCHANAN: Well, look, Chris, we can‘t—how are you going to stop a couple of guns or a bagload of .45s or even some M-16s going south when George W. Bush himself said six million people tried to get into the United States in the first five years that we caught—six million. You got 12 to 20 million people in the United States! You got gangs all over America who have come from El Salvador...

MATTHEWS: Right.

BUCHANAN: ... Central America, Mexico.

(CROSSTALK)

MATTHEWS: Even if you put your wall up, we still have a Gulf of Mexico. We still have a Pacific Ocean.

BUCHANAN: Yes. Special forces of Mexico called zetas trained by the Americans have gone rogue and gone rotten, and they‘re the guys killing people left and right. It‘s specialists. They‘re like guys we got in Iraq. And they‘re now in the Mexican—they‘re rogues from the Mexican army.

MATTHEWS: If you were to ambassador to Mexico, what would you do?

BUCHANAN: U.S. ambassador to Mexico?

MATTHEWS: How would you stop this? How would you stop this thing?

BUCHANAN: Well, first thing I‘d do, I‘d start the security fence on the border. Do that. Secondly, I think you do help the Mexican government on this. Third, I wouldn‘t send National Guard. Frankly, I‘d go down there and get with some of those folks in there and you get some of those folks coming across, I‘d use American snipers on some of these—some of these guys—what do they call them, cayoques (ph). Cayoques.

MATTHEWS: Yes.

BUCHANAN: They‘re raping women and stuff like that.

MATTHEWS: You would take shots at people fleeing up here for jobs?

BUCHANAN: Not the people fleeing for jobs, the people abusing them...

MATTHEWS: OK.

BUCHANAN: ... robbing them, raping them. There‘s some horrible people in this human traffic trade and this drug trade. And yes, I‘d use lethal force on them.

Chris, this is so much more important about what‘s going to happen to America in the next 30 years than whether a Sunni or a Shia is running things in Baghdad! This is about the future of our country. We‘re going to have 135 million Hispanic folks in the USA because of this mass migration, as many Mexicans almost in here as there are in Mexico. How is the country going to stay apart? Because the border‘s going to come—the border‘s not going to exist. How do you have a country?

MATTHEWS: Well, a lot of—don‘t most of the people who emigrate to this country assimilate and become Americans?

BUCHANAN: No! Not when you‘ve got 135 million. They can live quite happily. They can handle—when you have small groups come to a city, they—Irish and Italians and Jews and Greeks and all the others, they peel off and become Americans. They‘re the fastest growing radio, TV stations are Hispanic. There‘s too many at one time, too many coming in.

MATTHEWS: OK, let me ask you a question off this question. Hillary Clinton—she—an ambassador I had lunch with yesterday from another country pointed out that Hillary Clinton is a major figure in the world right now because as secretary of state, she‘s not a bureaucrat, she‘s not a civil servant or a foreign service officer. She sees her ability and her sway to be much larger than simply taking orders from the president. It‘s to go out there and think originally about the messages she should be sending. And here she was with Andrea Mitchell, our colleague...

BUCHANAN: Right.

MATTHEWS: ... taking a—you don‘t hear the typical secretary of state talking about the drug problem in this country, the gun problem in this country. What do you make of her and her great sense of her portfolio as secretary of state here?

BUCHANAN: I think she‘s much larger than a traditional secretary of

state. Frankly, in his first days, Colin Powell was there. But Jim Baker

nomination, and everyone—she goes around the world, people look at her and all, and that can be an asset for the United States, and she‘s got...

MATTHEWS: I think so.

BUCHANAN: She‘s got...

MATTHEWS: I also think the Clintons are coalition partners with the President, Obama, and very much like an Israeli cabinet. It‘s like Ehud Barak coming in.

BUCHANAN: Right.

MATTHEWS: The Clintons are coalition partners domestically and foreign policy-wise. I think it‘s going to be interesting to watch this thing develop. Hillary Clinton is not an employee of the president. Anyway, thank you very much—nor should she be, by anybody‘s lights.

Thank you, Pat Buchanan.

Coming up: President Obama takes to the Internet, holding a virtual town meeting on line. Is he once again trying to bypass the mainstream media? Dare I say, cable television?

MATTHEWS: Welcome back to HARDBALL. President Obama keeps barnstorming for his budget across the country. It‘s like the campaign never ended. Today he did an event at the White House, but it was another one of those town meetings. Let‘s watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You know, when I was running for president, I promised to open up the White House to the American people. And this event, which is being streamed live over the Internet, marks an important step towards achieving that goal. Now, I‘m looking forward to taking your questions and hearing your thoughts and concerns because what matters to you and your families and what people here in Washington are focused on aren‘t always one and the same thing.

(END VIDEO CLIP)

MATTHEWS: Well, what‘s the president up to? Is he doing what he does well? Is he simply sticking his strengths? Or is he trying to bypass what he sees as a problem area, meaning the national press corps. Roger Simon‘s chief political columnist for “Politico” and Susan Page is the Washington bureau chief for “USA Today.”

Well, being from “The Politico,” you must be very proud, Roger, because you were the only news organization that writes as part of its work that got called on at the press conference the other night. He skipped “The New York Times,” “The Washington Post,” “The LA Times,” “The Wall Street Journal.” He didn‘t call on any of those people, but he called on you guys.

ROGER SIMON, POLITICO.COM: That‘s as it should be. He called on Jessica Yellin...

MATTHEWS: As it should be?

SIMON: ... who asked a great question. But seriously, all the upset that has followed this...

MATTHEWS: ... that these people who show up are self-selected, to these town hall meetings? They‘re not exactly hostile to this guy.

(LAUGHTER)

MATTHEWS: I mean, there‘s a lot of—it reminds me of Victoria Jackson in those make-up infomercials. You know, How do you put on this product? How do you like your product? You know. It‘s a lipstick. They‘re soft.

SIMON: It‘s a way of delivering talking points, the town halls are.

(CROSSTALK)

MATTHEWS: I don‘t say ringers. I think the whole room feels like that.

PAGE: But you know, it doesn‘t work the way it—when a president stands up before a news conference and asks—answers tough questions, he looks good. He can make his points. It‘s persuasive. When a president—

I‘m not saying there‘s anything wrong with the forum he did today, but when he stands up and gets softball questions and does his talking points, it‘s much less persuasive. It doesn‘t do the same thing that a real news conference...

MATTHEWS: Remember Nixon used to do these things, these town hall meetings?

MATTHEWS: Bud Wilkinson (ph), the coach from Oklahoma, doing the moderating. Come on! They‘d have, like—his idea of diversity was to have Ed Brooke in the first row, you know, I mean—African-American senator, Republican from Massachusetts. I mean...

SIMON: Like at school rallies, when you ask the principal...

MATTHEWS: Is that...

(CROSSTALK)

MATTHEWS: ... Potemkin village?

BUCHANAN: The town halls always are, but I don‘t think the president is—he‘s not substituting them for the news conferences. He just did a news conference. The reporters were free to ask him whatever they wanted to ask. Look...

MATTHEWS: Can I ask a tough question?

SIMON: Sure.

MATTHEWS: Why was the presidents conference so dull the other night? Didn‘t you wish, without knocking anybody, a Sam Donaldson had walked in the room or a Leslie Stahl or a Chris or Mike Wallace, just some tough—that one guy from that one CNN question was a little bit snarky, just a little bit.

PAGE: I think reporters are somewhat responsible for not asking tougher questions, following up in a tougher way. I mean, I thought it was...

MATTHEWS: There wasn‘t an edge to it.

PAGE: I thought it was OK, but yes. And it‘s better for us and for him when there‘s a little bit—when there‘s a little bit sharp—little bit sharper tone.

MATTHEWS: I felt like they were all saying, like Tavis Smiley used to say in the old days, With all due respect. I mean, do you have to say, With all due—let me ask you about this president. Somebody one said to me you always turn your job, whatever your new job is, into what you like to do. Like, some people turn every job into a PR job. It‘s all communications.

Other people, like Jimmy Carter, the former president, turns his job into an engineering job: How many information boxes can I fill out? How complicated can I make it?

This president seems to have turned the presidency into a presidential campaign.

ROGER SIMON, CHIEF POLITICAL COLUMNIST, THEPOLITICO.COM: Oh...

MATTHEWS: It looks like he‘s still campaigning.

SIMON: Oh, also, I think is the aspect of, he‘s turned into a—in some respects, a college professorship, which...

SIMON: He likes to explain things. He likes to take complex problems, the economy, the war, education, health care, believe they are explainable and reasonable, have reasonable solutions, and explain it to the American people, because that‘s where the source of his power is.

(CROSSTALK)

MATTHEWS: Will that work?

PAGE: You know, and it‘s—it‘s—it is working in terms of the economic. We have seen in the Gallup daily tracking poll a big rise...

MATTHEWS: We have got a new number, though, of people coming up.

(CROSSTALK)

PAGE: You know, we have been asking—Gallup has been asking people every day, do you think the economy‘s getting better or worse? And that number down to 7 percent...

PAGE: It‘s up to 29. Now, that‘s not a huge number, but it‘s the highest number since July of 2007.

And the last two weeks have been a time where we have seen every day an increase in the number of people who feel good about the economy and a decline in the number of people who say...

(CROSSTALK)

MATTHEWS: Who do you credit that with, the market, the stock market, the Dow, or is it the president?

PAGE: I think the rising stock market is the—I think the rising stock market is the biggest thing. But I think that reassuring rhetoric from President Obama is probably...

(CROSSTALK)

MATTHEWS: OK. What happens when this—I think he does great in front of a crowd. I mean, I have—I have—some of these people, even President Bush, at times, I would at him and say, I don‘t think I could do it as fast as he can think, with the pressure on these guys, and as hard as we all think we‘re smart. We all think we‘re smart.

(LAUGHTER)

MATTHEWS: Let‘s be honest. But we don‘t think we could do that, what they do, stand in a group of 200 people who are out there to make them look stupid, sometimes.

But I wonder if that works when you get in the room with these senators, who all have to run for reelection, who all know their states better than he knows them. You‘re from Montana, you‘re from North Dakota, somewhere, right? You‘re from a state that is not liberal. You are not here from the netroots. You are not here from the Daily Kos.

But you have to deal with these people. Can he convince them they have to go along with him on the toughest questions of this year? Are we going to get a real health care reform bill? Are we really going to deal with these issues or just muddle through?

SIMON: Well, no. They will listen because he‘s what the Democratic Party has right now. He‘s the most—by far, the most popular person in the Democratic Party, the most popular person in the country.

MATTHEWS: Can he use that? Can he exploit that?

SIMON: Of course. It is leverage. And he‘s using it.

And he goes to senators and says, look, this is the plan. This is what the American people voted for.

MATTHEWS: Oh, I‘m with you.

SIMON: They voted for change. And, you know, come along with me, and we will get there together.

MATTHEWS: Can he take that into a room on Capitol Hill? You have been up there. You have been in the hallway, at least.

(LAUGHTER)

MATTHEWS: But, in that room—I was in those rooms years ago. But when you get in that room, can he talk turkey to a senator and say, look, Mr. and Mrs. Senator, I know your state; you‘re right to vote with me; don‘t make the mistake of being cautious; this is the big opportunity?

PAGE: Well, he can try to make that case, but I think, on something like health care, where of timetable is so short this year...

MATTHEWS: Yes.

PAGE: ... I think it‘s a hard sell to do major health care reform in a space of a few months, which is what he talking about.

MATTHEWS: Yes, I think it is hard, but I think he has to do it.

SIMON: He will never be more popular than he is now.

MATTHEWS: I don‘t think he can miss this chance.

As somebody once said—I keep going—I feel like I‘m really getting really old, because I always use these phrasings now. A friend who is a congressman says, sometime in your life, the galloping horse of history rides by. Are you going to get on it?

(LAUGHTER)

MATTHEWS: Right? Are you going to get on it? And that‘s the question that this president has to answer.

Up next: The HARDBALL Award goes to one public official who—who‘s been actually looking good. Believe it or not, there‘s one person out there who has been looking good doing their job in this AIG bonus mess, one guy. And we are going to be giving him an award in a minute.

You‘re watching it, HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL.

Tonight, I have got a HARDBALL Award that‘s also, if I dare predict it, a promise of greatness to come.

First, a preview from the past, a father who gave one of the great addresses in American history, the year, 1984, the venue, the Democratic National Convention in San Francisco, the topic, the economic policies of Ronald Reagan.

(BEGIN VIDEO CLIP, JULY 26, 1984)

MARIO CUOMO (D), NEW YORK GOVERNOR: There is despair, Mr. President, in the faces that you don‘t see, in the places that you don‘t visit in your shining city.

In fact, Mr. President, this is a nation...

(CHEERING AND APPLAUSE)

M. CUOMO: Mr. President, you ought to know that this nation is more a tale of two cities than it is just a shining city on a hill.

MATTHEWS: A quarter-century later, a son steps forth, showing signs of his own leadership. Again, the issue is social justice between knows with economic power and those without it.

In the charged atmosphere surrounding AIG and those huge bonuses, Attorney General Andrew Cuomo of New York has emerged as the one public figure on the scene with a demonstrated commitment to watching the public‘s interests. At a time of great skepticism, he‘s doing his job.

Last week, he subpoenaed AIG for a list of employees in its Financial Products unit that had received those bonuses, those payouts. This Monday, Andrew Cuomo announced on a conference call that he had gotten nine of the 10 top bonus recipients to voluntarily give back their payouts.

(BEGIN AUDIO CLIP)

ANDREW CUOMO, NEW YORK ATTORNEY GENERAL: I would like to say to the individuals who have given the money back, you have done the—quote, unquote—“right thing.” You have done what this country now needs and demands. We are living in a new era of corporate and individual responsibility.

And I believe the employees have set an example for the rest of the company.

(END AUDIO CLIP)

MATTHEWS: CNBC reports today that Cuomo is ready to issue new subpoenas to find out where AIG has been passing its federal bailout money.

So, for political moxie, force of will and the willingness to play hardball with Wall Street bankers, I present tonight the HARDBALL Award to New York‘s rising star, its attorney general, Andrew Cuomo.

Up next: There‘s a hot race for Congress in Upstate New York, and the White House is getting very much involved. Will that New York race be a barometer of what‘s coming in 2010? Our strategists, Republican and Democrat, coming here next.

Stocks rallying again—the Dow Jones industrials surged 174 points. The S&P 500 gained almost 19, and the Nasdaq up 58 points. The Nasdaq is now in positive territory for the year.

First-time jobless claims rose again last week to 652,000. Meantime, the number of people continuing to receive unemployment benefits set a record for a ninth straight week, rising to 5.56 million.

General Motors says 7,500 hourly workers signed up in this latest round of buyouts and early retirement incentives. GM offered $20,000 in cash and a $25,000 voucher to buy a car. GM says that, since 2006, more than 60,000 workers have taken buyouts or early retirement packages.

And rates on 30-year fixed-rate mortgages fell this week to the lowest rate level on record, dropping to a nationwide average of 4.86 percent.

Tuesday‘s special election for a U.S. congressional seat up in New York State is the spotlight. Will it be a barometer, a test of what‘s to come next year? Will it be a referendum after three months of the Obama administration?

Todd, you guys must be looking for a win. I mean, you have had a lousy two years. You lost in ‘06. You lost the Congress. Then you lost the White House. Are you thinking this is the big comeback up in Upstate New York in the former Gillibrand district, because she is the senator now? Is this going to be a chance where you could win one?

TODD HARRIS, REPUBLICAN STRATEGIST: There‘s certainly a lot of hope and anticipation, but we‘re also cognizant of the fact that Obama carried the district. Gillibrand won, was reelected in that district with 67 percent of the vote.

MATTHEWS: You lowballing me?

HARRIS: No, no.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: Yes, he is.

MATTHEWS: Yes, you are.

He‘s lowballing me.

(CROSSTALK)

HARRIS: OK. I will say this. It‘s in a part of the country where we have not done well, as Republicans, the last couple of years.

But I‘m—what I am also saying is that this is a—more of a conservative district than it is a Republican district. It is a district that is—it voted for Obama and Gillibrand.

MATTHEWS: It seems like those guys—I will be taking your side here

I would like to smack you around now.

(LAUGHTER)

MATTHEWS: But those guys—I say this phrase about Arlen Specter in Pennsylvania and I say it about the two women senators from—the two senators from Maine. They‘re the last of the Mohicans. The Republicans are getting run out of the Northeast. And this would be a big run-out.

MCMAHON: Well, the Republicans are going to run out of the Northeast.

But Todd just said something that is right. It‘s a conservative district. And one of the reasons that Kirsten Gillibrand may have a primary is because she fit the district pretty well. She wasn‘t a liberal Democrat. She wasn‘t somebody that—that the folks in New York City would prefer as a United States senator, perhaps.

But the fact of the matter is, it‘s still a Republican district. It‘s been historically a Republican district.

I‘m always—I always caution people not to read too much in terms of how much a special election serves as a—a barometer of what‘s going to happen in the next election.

But what it does do, certainly, this race is a—is a referendum on the stimulus package.

MATTHEWS: OK. Here‘s what being thrown into this mess. It‘s not just a battle between R‘s and D‘s.

It‘s all the usual suspects. Here‘s the Rush Limbaugh. He‘s come into this thing. Here‘s a flier put out by the Democratic candidate in Upstate New York, Scott Murphy, all about Rush Limbaugh, using—here it is—“I hope he fails.”

So, there they are going after the worst thing Rush Limbaugh has ever said, unless he just wants his small niche of people around him, to say, this candidate‘s another one of those people rooting for America to go down.

HARRIS: Special elections have notoriously low turnout. So, these are all about mobilizing your base. That mail piece, I‘m sure, mailed to partisan Democratic voters, it‘s about mobilizing those voters to try to get them to the polls.

If it works, I think you can expect to see Democrats employing the Rush Limbaugh mailer, Rush Limbaugh phone calls across the country.

MATTHEWS: She was a liberal New Yorker, real activist, from the West Side of New York, I guess. And everybody used her in every campaign. Oh, he votes with Bella Abzug.

MCMAHON: If it wasn‘t Bella, it was Ted Kennedy.

MATTHEWS: Right.

MCMAHON: I was working for Teddy at the time. And, you know, obviously, he was the big bogeyman.

Todd is right about what they‘re trying to do. They‘re trying to stoke the base. It is a turnout election. But it‘s also an opportunity for them to put another Republican on the record. Tedisco is going to have to either say, is he a Rush Limbaugh Republican or is he some other kind of Republican?

And there‘s no good answer there, because, if he‘s some other kind of Republican, maybe he can win. But Rush Limbaugh then goes after them.

So, you are going to see a little bit of this, and you‘re going to see it in districts like this. The fact of the matter is, if you looked at performance of the district, which is the most likely indicator of who‘s successful, partisan performance, the Republicans should win this.

HARRIS: You are going to get me in more trouble than I get in already.

(LAUGHTER)

MATTHEWS: You belong in those meetings with a happy face.

“Mr. President, what‘s it like to be our leader? Gee whiz.”

HARRIS: Sixty-seven percent reelection of Gillibrand.

MATTHEWS: Right.

HARRIS: Obama carried the district. This is a district that does not have a problem voting for Democrats, when Democrats can give them a compelling message.

This is going to be a referendum on both—there is a lot at stake—a referendum on the stimulus package, a referendum voter—on voter anger over those AIG bonuses. And, on the Republican side, I think that a lot of people will be giving plaudits to Michael Steele if—if he wins and to...

(CROSSTALK)

MATTHEWS: OK, I have got to ask you something that‘s really interesting.

Do you think God belongs in American politics? I mean, as per, not moral issues, because everything is sort of a moral issue, war and peace, certainly, capital punishment, guns. There‘s a lot of moral aspects to a lot of things.

Do you like this Sarah Palin always talking about—we are going to talk about it in the next segment, because I‘m going to bring it up now, because it fascinates me. She knocks the McCain campaign because she didn‘t have anybody in the campaign to pray with.

That is an amazing public statement to me. And then you have got Michael Steele, who seems like a decent guy, saying if he will run for president if God wants him to.

Are we hearing whispers? I mean, this is a little bit theocratic, isn‘t it? A little scary?

HARRIS: That‘s a lot of God references.

(CROSSTALK)

MATTHEWS: Why God playing a role in, “I didn‘t have anybody to pray with”?

HARRIS: Well...

MATTHEWS: And that‘s a knock against the McCain campaign?

HARRIS: I don‘t know what she was trying to do there. I think she‘s trying to appeal to a religious base.

MATTHEWS: Is this good for American politics, where you have no religious test?

I mean, I‘m really offended, as a Roman Catholic, to have arguments about church, you know, doctrine and moral philosophy. Fine, we should debate it all the time and think about it and care about it. But arguing about in it now in secular newspapers, people taking shots at other Catholics, saying they‘re not good Catholics, in secular newspapers?

I think it‘s wrong venue. I render under Caesar the things that Caesar and the under God the things that are God. I think we‘re crossing the line with this stuff. That‘s my thought.

MCMAHON: I think you‘re absolutely right. And I think it‘s a dangerous line for—for the Republicans to cross, because religious intolerance—and, you know, it‘s bordering on religious intolerance when she‘s looking down at somebody, saying, I couldn‘t find anybody to pray with me, I couldn‘t find anybody to worship my God.

MATTHEWS: This is McCain.

MCMAHON: No, I know. And it‘s not just that. It‘s political disloyalty.

I don‘t understand how she thinks there‘s a political benefit there, unless she just wanted to take a shot.

HARRIS: Well...

(CROSSTALK)

MATTHEWS: Is he the Antichrist? I mean, she‘s portraying him as some ungodly figure in which a campaign, a national campaign, where all the people surrounding her, and she couldn‘t find anybody that shared her Christianity? Is that what she‘s saying?

HARRIS: I have no idea. Per usual, I have no idea what she is talking about.

MATTHEWS: Up next: Sarah Palin is back. I want to give you full quote from her, let her speak for herself. I hope this sounds good. We have got the audio. She is really talking, I think, a lot about the deity in a political environment. And I don‘t think it‘s normal.

We will be right back.

(COMMERCIAL BREAK)

MATTHEWS: Coming up: Michael Steele for president? The RNC chair says he will run if God wants him, too. That‘s what he said—that and more next in the “Politics Fix.”

A lot of God coming up here in politics—right here on HARDBALL.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Time for “The Fix” with David Corn, the Washington bureau for “Mother Jones” magazine, and Lois Romano of “The Washington Post.”

Let‘s take a listen now to the governor of Alaska. She took another shot at McCain—and the whole campaign, in fact—in a recent speech up there to the north.

GOV. SARAH PALIN ®, ALASKA: It was the night of the vice presidential debate against Biden.

So, I‘m getting ready to go out there on stage. And, before any big thing, I pray. And I ask for, you know, God‘s wisdom, his strength, and everything else, and I dedicate it to—to God and ask him to lift me up.

So, I‘m looking around for somebody to pray with. I just need maybe a little help, maybe a little extra. Well, and the McCain campaign, love them, you know, there are a lot of people around me. But nobody that I could find that I wanted to hold hands with and pray with.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: What do you make of that, Lois? “I couldn‘t find anybody to pray with.” It just seems like you don‘t even need to talk like this.

LOIS ROMANO, “THE WASHINGTON POST”: I think it‘s bizarre. And I think it‘s judgmental. And why did she need to pray with anyone? Why couldn‘t she just pray by herself?

You know, prayer and religion are very private things. I think she was clearly pandering to the only base she has, which is the religious right. She just formed a PAC. And this is the way she gets news.

DAVID CORN, WASHINGTON BUREAU CHIEF, “MOTHER JONES”: And, remember, she was talking there to a meeting of Republicans. So, she was dissing John McCain before Republicans.

And a lot of McCain aides who were worked—who worked with her on the campaign who are very offended by this. They were around. They say:

It was a mean and catty thing to say. I think the big point it shows is that she is not getting good political advice. She is up in Alaska. There have been a lot of Republican consultants and advisers down in Washington who have tried to call—call her and give her some strategic advice. They have all been told, no thank you, we will handle it from here.

And if this is the best advice they have giving, to go out there and talk about not being able to pray with John McCain‘s campaign aides, I mean, I don‘t see the point.

MATTHEWS: You know, I just wonder whether we have underestimated her, because I do think she has, you know, the “it” thing in politics. She can give a speech better than 90 percent of the politicians you meet. She turns on a crowd. She does. She‘s a good orator.

(CROSSTALK)

MATTHEWS: I mean, compared to 90 percent of the men and women you meet in politics, white and black, Hispanic, Asian-American, she can actually turn on a crowd.

(CROSSTALK)

CORN: You were there the night she gave that speech in Minneapolis.

MATTHEWS: Yes.

CORN: I was there, too. And I thought it was a great speech. I wrote it was a great speech. But—and she got very positive reviews.

MATTHEWS: Good press, in fact.

CORN: And there were Democrats—and there were Democrats after saying: Oh, my God. Oh, my God. We have to worry about this woman.

CORN: I understand all the tactical reasons to do that. But it‘s a problem.

Why? Because she‘s not an unknown quantity at this point. She—she has national stature. She ran with McCain.

MATTHEWS: Yes.

CORN: She was on the ticket. She was a vice presidential nominee.

She can‘t act like a backbencher doing these things...

(CROSSTALK)

MATTHEWS: OK. Here‘s why she‘s a player, a figure.

Both times, the Republican Party, in 1960 and 1976, that I can recall lost with moderate candidates, middle-of-the-road candidates, Nixon in ‘60 against Kennedy, a—really, a heartbreaker for him, and, of course, Jerry Ford losing to Jimmy Carter in ‘76, what do they do?

The Democrats, when they lose a close one, go back into the workroom. They‘re real pols. And they come up with something, intricately figure it out, and they come up with something a little easier to sell, right?

CORN: Yes.

MATTHEWS: Republicans don‘t do it that way. They go back to principle. They go to ideology. They go to the right.

MATTHEWS: How about in a four—how about a three-way or four-way race with three men and one woman? I think she wins.

ROMANO: I don‘t think she wears well.

MATTHEWS: OK.

(CROSSTALK)

MATTHEWS: Let me—let me—here‘s another Republican story. Michael Steele, again with the God question, was asked if he would consider running for president.

Let‘s take a listen.

(BEGIN VIDEO CLIP)

MICHAEL STEELE, CHAIRMAN, REPUBLICAN NATIONAL COMMITTEE: Consider it if the opportunity were there and it was right.

But, you know, God has a way of revealing stuff to you and making it real for you through others. And if that‘s part of the plan, it will be the plan. We may have this conversation in eight, 10, 12 years, and you will sit back and you will play the tape back and say, oh, look at what you said.

MATTHEWS: Why does everything sound like “The 700 Club” with this party now?

ROMANO: I think, with him...

MATTHEWS: I mean, everything seems to be a religious discussion.

ROMANO: Well, he‘s been slapped around a little bit.

I mean, he‘s kind of gone off the reservation. And I think he‘s trying to get back on the reservation a little bit. I mean, he attacked Rush, and, you know, said a couple of other things. So, I think he‘s trying to get with the program here, before he loses his job.

MATTHEWS: Will be right back with Lois Romano and David Corn with the “Politics Fix.”

We‘re going to talk about Hillary Clinton. She is back big time. She is a major force in American domestic life, as well as foreign policy. We saw that again right now today. It‘s a big story—Hillary Clinton back in the story tonight—here on HARDBALL.

You know, Hillary Clinton is back in the news as secretary of state now for the first time with a major political statement, blaming—look, appropriately—the United States drug trade and the availability of automatic weapons or semiautomatic weapons in this country in this country for the hell that‘s broken loose in Mexico, down below our border.

Apparently, most of those automatic weapons or semiautomatics get bought up here.

CORN: Yes.

MATTHEWS: The drugs are sold up here. So, the money is coming from up here, and the guns are coming from up here.

And Hillary Clinton said, as secretary of state, don‘t blame it all on the Mexicans.

Lois, blame America first is not going to be a good, popular message with some on the right or anybody.

ROMANO: I think Hillary‘s just putting down her markers.

You know, she speaks her mind, and she wants to make it clear that, you know, she‘s not going to stay on message. And this is what she thinks and this is what she‘s going to believe. And she‘s establishing her portfolio.

CORN: But even more important than the bureaucratic wrangling is the fact that she‘s taking on two big issues here, guns and drugs, which we almost get no motion on politically in this country. And she happens to be right.

I mean, we have been fighting a war, an ill-fated, unsuccessful war on drugs for how many decades now?

MATTHEWS: Well, Pat said you either kill everybody who uses drugs or you legalize them.

CORN: Right.

MATTHEWS: But everything in the middle doesn‘t work.

CORN: And that—but that‘s a conversation that can‘t be had.

Today, at the press briefing, Robert Gibbs was asked about a lot of

this stuff, after she raised the issue. And on the assault weapons ban, he

you know, he said that Barack Obama supported it, but he showed no enthusiasm for trying to implement it, and said, there are a lot of other steps we can take before doing that.

MATTHEWS: Right.

CORN: And on legal—and, on marijuana, you know, the question came up, because it came up at the virtual town hall meeting, when he really joked about it. He didn‘t answer the question. And Gibbs said, he‘s not for legalization, period.

Now, if we can‘t discuss these things, and Mexico explodes, we‘re going to have really no—not too many policy solutions to—to—to try.

MATTHEWS: Well, we‘re stuck then, Lois, because we do have a drug problem in this country. It is a relatively free country.

And people can break the law with some impunity. Let‘s face it. Cocaine has been around a long time. Marijuana‘s been around since the time all of us were kids. It‘s been in our—we have seen it. It‘s around. We know people who use it or have tried it ourselves. It‘s everywhere.

And the idea that we‘re going to stop it, as the senator—as the secretary of state suggests, is not credible. So, we‘re going to have a Mexican war going on down there, right on our border, with automatic weapons firing and people getting beheaded.

ROMANO: Well, but I think she‘s now put the issues in play.

I mean, as you say, you know, Gibbs is being asked about it. She‘s elevated them to issues. And maybe, you know, she‘s not going to get exactly what she wants out of it, but she has started a dialogue.

MATTHEWS: Has she established herself now as a presence domestically, as well as in foreign policy...

CORN: Well, I think...

MATTHEWS: ... by taking this step, saying, it‘s what‘s wrong with America, not just what‘s wrong with our foreign policy?

CORN: She‘s one of those figures, whenever she chooses to interject herself into any debate, she can. You know, she chose...